Imax delays financial report

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TORONTO -- Imax Corp. on Thursday further delayed the filing of its 10-K and annual financial results after broadening an internal review into accounting errors. The Toronto-based exhibitor said it could not predict when it will file its full-year 2006 earnings report.

The Canadian company first delayed its latest financial results March 16, saying it needed to investigate $2.5 million in accounting errors that stretched from 2001 to 2006 (HR 3/17).

The accounting errors were uncovered by Imax executives and PricewaterhouseCoopers Llp. during the company's recent year-end audit, which exposed certain costs that were capitalized when they should have been expensed as incurred, in addition to unrecorded branch-level interest taxes.

The newly widened review also will encompass the early results of ongoing probes by securities regulators on both sides of the border into the exhibitor's previous accounting recognition of theater revenue.

"In the course of completing this restatement and the year-end audit, and in recently reviewing certain comments received from the U.S. Securities and Exchange Commission and the Ontario Securities Commission, the company has determined to broaden its review to address certain issues related to these comments, primarily in connection with its revenue recognition for certain theater system installations in previous periods, including the fourth quarter of 2005," Imax said.

Imax's failure to meet a 15-day grace period that expires Saturday to file its annual financial results has broad implications, including defaulting on a reporting covenant for its senior notes. The company said it was securing a waiver from its notes holders, while its bankers have agreed to delay receiving audited statements until June 30.

Imax added it might need to restate additional items in its financial books beyond the previous $2.5 million in identified errors. At the same time, the company said it does not anticipate that additional potential restatements will have any impact on its previously reported or existing cash accounts.

Imax also will ask Canadian securities regulators to issue a management and insider cease-trade order.

Imax shares closed down 33 cents, or 6%, on Thursday to $5.04. It led the decliners Thursday on The Hollywood Reporter's Showbiz 50 stock index.